Case C-257/20: Judgment of the Court (Fifth Chamber) of 24 February 2022 (request for a preliminary ruling from the Varhoven administrativen sad — Bulgaria) — ‘Viva Telecom Bulgaria’ EOOD v Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ — Sofia (Reference for a preliminary ruling — Taxation — Withholding tax on notional interest on an interest-free loan granted to a resident subsidiary by a non-resident parent company — Directive 2003/49/EC — Payments of interest between associated companies of different Member States — Article 1(1) — Exemption from withholding tax — Article 4(1)(d) — Exclusion of certain payments — Directive 2011/96/EU — Corporation tax — Article 1(1)(b) — Distribution of profits by a resident subsidiary to its non-resident parent company — Article 5 — Exemption from withholding tax — Directive 2008/7/EC — Raising of capital — Article 3 — Contributions of capital — Article 5(1)(a) — Indirect tax exemption — Articles 63 and 65 TFEU — Free movement of capital — Taxation of the gross amount of notional interest — Recovery procedure for the purposes of the deduction of expenses related to the grant of the loan and a possible refund — Difference in treatment — Justification — Balanced allocation of the power to impose taxes between the Member States — Effective collection of tax — Combating of tax avoidance)
Date: 2022-02-24
Institutions: Court of Justice
Subjects: capital increase, equal treatment, interest, loan, parent company, principle of proportionality, profit, subsidiary, tax, tax exemption








C_2022165EN.01000602.xml










19.4.2022   


EN


Official Journal of the European Union


C 165/6






Judgment of the Court (Fifth Chamber) of 24 February 2022 (request for a preliminary ruling from the Varhoven administrativen sad — Bulgaria) — ‘Viva Telecom Bulgaria’ EOOD v Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ — Sofia
(Case C-257/20) (1)

(Reference for a preliminary ruling - Taxation - Withholding tax on notional interest on an interest-free loan granted to a resident subsidiary by a non-resident parent company - Directive 2003/49/EC - Payments of interest between associated companies of different Member States - Article 1(1) - Exemption from withholding tax - Article 4(1)(d) - Exclusion of certain payments - Directive 2011/96/EU - Corporation tax - Article 1(1)(b) - Distribution of profits by a resident subsidiary to its non-resident parent company - Article 5 - Exemption from withholding tax - Directive 2008/7/EC - Raising of capital - Article 3 - Contributions of capital - Article 5(1)(a) - Indirect tax exemption - Articles 63 and 65 TFEU - Free movement of capital - Taxation of the gross amount of notional interest - Recovery procedure for the purposes of the deduction of expenses related to the grant of the loan and a possible refund - Difference in treatment - Justification - Balanced allocation of the power to impose taxes between the Member States - Effective collection of tax - Combating of tax avoidance)
(2022/C 165/06)
Language of the case: Bulgarian

Referring court

Varhoven administrativen sad

Parties to the main proceedings


Applicant:‘Viva Telecom Bulgaria’ EOOD

Defendant: Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ — Sofia

Intervener: Varhovna administrativna prokuratura na Republika Bulgaria

Operative part of the judgment







1.


Article 1(1) of Council Directive 2003/49/EC of 3 June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States, read in conjunction with Article 4(1)(d) of that directive, Article 5 of Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States, as amended by Council Directive (EU) 2015/121 of 27 January 2015, and Articles 3 and 5 of Council Directive 2008/7/EC of 12 February 2008 concerning indirect taxes on the raising of capital must be interpreted as not precluding national legislation which provides for the taxation in the form of a withholding tax of notional interest that a resident subsidiary which has been granted an interest-free loan by its non-resident parent company would have had to pay to the latter had the loan been concluded under market conditions;










2.


Article 63 TFEU, read in the light of the principle of proportionality, must be interpreted as not precluding national legislation which provides for the taxation in the form of a withholding tax of notional interest that a resident subsidiary which has been granted an interest-free loan by its non-resident parent company would have had to pay to the latter had the loan been concluded under market conditions, where that withholding tax applies to the gross amount of that interest, without it being possible to deduct, at that stage, expenses related to that loan since a subsequent application to that effect is necessary for the purpose of recalculating that tax and making a possible refund, in so far as, first, the length of the procedure laid down for that purpose by that legislation is not excessive and, second, interest is owed on the amounts refunded.






(1)  OJ C 279, 24.8.2020.